Here’s another installment of the strategy series: Dell and Apple.
Disclaimer: This analysis is based solely on the strategy discussion in Jack Welch’s Winning.
Two companies that are pioneers in selling computers and other electronic items in the world have completely opposite strategies. Dell, with its online store and customization engine, makes buying a computer all about how much memory, hard disk and USB slots you need on your computer. Apple on the other hand sells you much more than a computer or personal music system iPod. It sells an experience primarily through those wonderfully designed Apple stores. Unlike Dell, Apple provides customer with more pre-customized boxed options as compared to customizing that box (Apple computers are customizable as well at Apple.com).
If we look at Dell’s model of selling computers, what Dell is doing is selling an assembled box of all the different parts that makes a computer. Customize-ability of the computer plays a big role and design takes a back seat. The distinguishing factor is pretty much the price and support. Dell’s strategy, in simple words, is to commoditize the computers. Make buying computers as simple as buying any other home or office supplies. The strategy works great with corporate customers who care more about price and support.
Apple does not sell computers, it sells an experience, a membership to an exclusive cult and an entry to the Apple product ecosystem. Design plays the central role in all Apple products. Apple’s strategy, opposite to Dell, can be stated in simple words as de-commoditization of all the products it sells. As in any typical case of de-commoditization, price takes a back seat and customers get attracted to the product itself. Apple’s strategy is crisp and clear, and Apple implements it with perfection in any industry it enters, be it the computer industry, music industry or mobile phone industry.
These are two companies selling the same things with completely different strategies and execution plans. The debate will go on for ever on which company has a better strategy, but the success of Dell and Apple asserts the point that there’s no one strategy that is good or bad for your company. Your success depends on how crisp the strategy is and how well you are implementing it.
Here’s the next installment of the strategy series (based on the strategy chapter in Jack Welch’s Winning): Trader Joe’s.
Trader Joe’s tagline: Your Neighborhood Grocery Store. And if you visit one of these stores you will definitely get the feel of visiting a neighborhood store with an old-fashioned bell to call for help at the counters, wooden shelves, fresh bread and friendly staff. Another distinctive thing about Trader Joe’s is that, along with the regular products, you get a range of “unique” products including international frozen food, gourmet food and a different selection of wine and beer.
Trader Joe’s strategy, which seems to be ingrained in every part of the company, is very simple: provide a local feel and complement it with a unique selection of products. This is the winning strategy for the grocery chain with more than 300 stores and $6.5 billion in revenue.
This strategy provides Trader Joe’s a way to differentiate itself in the industry. Trader Joe’s distinguishes itself from other local stores by having a unique selection of products, and from competitors like Whole Foods, that carry similar products, by using its local store atmosphere.
Here’s the first installment of the strategy series: Thai Tom.
Walk by the University Way in Seattle during lunch or dinner hours and it will be really hard to miss a good number of foodies waiting outside a small and dark Thai food joint while the other places have good number of tables empty. That small shabby restaurant with a few tables, an open kitchen and a bunch of counter seats is Thai Tom. Maximum capacity: about 25. Minimum wait time: 25-30 minutes. The normal procedure at this place is to put you on waitlist and ask you to wait outside. 10 minutes later, hand you a wooden slate with menu on it. Another 10 minutes and your order is taken (still on the street outside). Then eventually you get a seat in. People from all around come to this place to have what is arguably (and voted for last three years as) the best Thai food in the city.
Thai Tom’s strategy is clear and crisp: focus on the product. Thai Tom with its cook and three member service crew probably never had a strategy review, but knowingly or unknowingly, formed a perfect strategy: serve the best Thai food in city. Every time I go there, I hear people arguing that if the capacity of this place is doubled, it will still be full all the time. But Thai Tom sticks to its strategy by having just one cook who knows how to cook the dishes with excellence.
How can competition take on Thai Tom? Provide differentiation by excelling where Thai Tom is weak, i.e. focus on service and ambiance of restaurant while serving the best possible food. It is very unlikely that Thai Tom customers will like a competing joint on University Way just for quality of the food, but by having a strategy that focuses on zero wait time, comfortable seating and likable ambiance, they will win some customers who are either in a rush or are not interested to wait outdoors in Seattle rain!
What is strategy? Jack Welch puts it so well in Winning: “Strategy is simply resource allocation. When you strip away all the noise, that’s what it comes down to. Strategy means making clear-cut choices about how to compete. You cannot be everything to everybody, no matter what the size of your business or how deep its pockets.”
I believe every successful business, small or big, has a clear and crisp strategy. Or put it in other words, to be successful, it’s better you have one for your business. Every person in a company should be on the same page when it comes to strategy, so it is critical for it to be simple.
Here, in the next few posts, I will analyze strategies for some of my favorite “brands” including a neighborhood restaurant, a grocery store, a retail giant and a couple of computer manufacturers.